Silver Is Being Manipulated, Platinum Is Not

Written by: Jeff Nielson01/18/13 - 6:00 AM EST

NEW YORK ( Bullion Bulls Canada ) -- Observant precious metals investors would have recently noticed a rare -- almost unheard of -- occurrence: A bullion market where prices actually respond to supply/demand fundamentals. No, obviously I'm not referring to either the gold or silver market, but rather the platinum market.

Analysis was provided by a mining Web site. Unlike the pseudo-analytic drivel spewed by the mainstream media concerning commodity markets, this featured long-term, hard data and cogent reasoning -- vs. the short-term trivia, empty rhetoric and fear-mongering we generally get from the corporate media.

Specifically, the article noted that recycling in the platinum market had quadrupled over the last decade. Compounding that bearish supply factor, industrial demand has softened considerably, and even jewelry demand has been shown to be more price-sensitive than previously thought.

The combination of these factors has meant that platinum inventories are abundant, and with weak supply/demand fundamentals and abundant inventories, prices have floundered. The price of platinum is now trading below the price of gold (a very unusual situation).

With a concrete example illustrating both supply/demand fundamentals and how markets are supposed to respond to those fundamental, the extreme/serial manipulation of the silver market appears even more blatant in comparison. Now let's look at the "fundamentals" in the silver market.

We can begin by looking at the absurdly low, current price of silver. This artificial/suppressed/manipulated price can be illustrated in several different ways. Relative to the price of gold, silver is priced at less than 1/3 of its historic average.

During the nearly 5,000 years in which humanity has been mining/refining gold and silver, the gold/silver price ratio has averaged roughly 15:1. Yet currently (and through all the recent decades of silver manipulation) this ratio has been depressed to 50:1 (or lower).

We know that this is a case of silver being underpriced rather than gold being overpriced, through simply examining the supply side of the gold and silver markets: The miners. Gold and silver miners are experiencing their second "depression" in five years, as the radical underpricing of silver and gold has made it difficult for established miners to raise capital, and nearly impossible for the junior exploration companies, who are the life-blood of the mining industry, to do so.

Indeed, silver mining is so severely depressed that despite a six-fold increase in the price of silver over the last decade, most of the world's silver is still produced as a secondary byproduct of other mining -- while bankrupted silver mines remain shuttered all over the world and new projects are extremely slow to develop.

Further proof of the suppressed/manipulated price of silver comes from the collapse of inventories, where global inventories plummeted by more than 90% over just 15 years (from 1990 to 2005). Despite the collapse in inventories, the six-fold increase in the price of silver has barely registered any reaction at all on the supply side, where mine-supply limps higher at an anemic rate of about 2% per year.